General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsDoes a VAT tax have to be regressive?
I have heard Vats called everything from "how we pay for nice things" to "the things that makes it harder for the poor to buy bread." Which is it?, How, and why?
canetoad
(17,072 posts)Goods and Services Tax, introduced in about 2001-02. It's 10% on just about everything apart from the following foods which have no tax:
https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/GST-and-food/?anchor=GSTfreefood
bread and bread rolls without a sweet coating (such as icing) or filling a glaze is not considered a sweet coating
cooking ingredients, such as flour, sugar, pre-mixes and cake mixes
fats and oils for cooking
unflavoured milk, cream, cheese and eggs
spices, sauces and condiments
bottled drinking water
fruit or vegetable juice (of at least 90% by volume of juice of fruit or vegetables)
tea and coffee (unless ready-to-drink)
baby food and infant formula (for children under 12 months of age)
all meats for human consumption (except prepared meals or savoury snacks)
fruit, vegetables, fish and soup (fresh, frozen, dried, canned or packaged)
spreads for bread (such as honey, jam and peanut butter)
breakfast cereals.
After 18 or so years, I'm so used to the GST it seems normal. When introduced, it replaced a whole host of various other sales taxes. The immediate effect was that electronics and appliances became a lot cheaper. Some things were more expensive but in the long run, I don't think it caused severe distress to anyone (and I'm by no means well-off).
applegrove
(117,885 posts)from income tax office 3 or 4 times a year to cover the vat tax you might be spending on non essential goods. About $100 each time.
DFW
(53,934 posts)In Germany, where I live, it is included in the prices of most goods and minor services. For major services, the invoice is just like in the USA in states with a sales tax, but it is applied to everything. If you have a 5000 accountant's bill, it will usually show the 19% VAT added on. However, if you buy a car, go to a restaurant or buy a ticket at a movie theater, the invoice will often be a round figure, saying "includes 19% VAT of (however much it is)." Most everyone pays it on most everything. It hits low income people hardest, of course, because it is applied to just about everything except medical bills.
At every turn, the government cashes in 19%. It has been called government heroin, because once it was introduced, it was always increased, never decreased, and the number of goods and/or services exempt always decreases. If you buy some appliance for 100, you have bought it for roughly 82 (rounding) and the store passes the 18 on to the government. The store paid the wholesaler maybe 50 for the appliance. That 50 also included 19% VAT, which the government again gets. The parts, if made in the EU, also included 19% when sold to the manufacturer. So did the cardboard box in which it was packaged. So did the printer's work to print up the cardboard box. Etc. Etc. If something was made outside the EU, it is subjected to a 19% import tax to replace the domestic VAT. There are a thousand tiny modifications, exceptions, intricacies and other loophole tricks (helps EU accountants stay in business), but that is essentially how it works. There is a reason the cost of living here is so high. A friend of mine is a judge on a tax court here and a professor of tax law at the university of Bonn.
Years back, the German government decided to put VAT on gas at the pump (again: regressive. You don't see it, it is included in the retail pump price). The thing was, the pump price already included the gasoline (about 40% of the price) and the gasoline tax (about 60% of the price). The VAT was imposed on the TOTAL, so Germans pay 19% tax not just on the gasoline, but also on the gasoline tax! I asked my friend if this wasn't totally illegal to make citizens pay tax on a tax? He said yes, it was, and if I had five years and three million euros for legal fees, I could probably successfully fight it in court. You get the picture.
For a while, the Germans even tried to put their 19% on low margin things like investment gold, which usually has a 1% or 2% margin of profit for the dealer. That put dealers in Germany out of business and drove the business to places like Luxembourg and Switzerland, who were smart enough to realize that you can't tax something at 19% if the profit margin is 2%. The EU countries quickly figured out the error, and exempted such transactions from VAT, a rare acknowledgement of reality from an area that prefers theories.
In the USA, each State already has its own sales tax (or not, as in the case of New Hampshire and a few others, but at least, it's their decision), so a national sales tax or VAT would be extremely difficult to implement--or justify, for that matter. Would we then prohibit states from having their own local taxes? And if so, which ones? Who decides? (We know--uncaring, clueless bureaucrats, that's who!)